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Hi. I'm working on the model by Gerali et al. (2010) and try to figure out how they estimate/calibrate the parameters in the first part. I cannot understand how the capital utilization cost parameter in the line 246 is derived: "eksi_2 = 0.1*r_k_ss; " I can see that "eski_1= r_k_ss" from the F.O.C of capital utilization rate at the steady state where "exp(u) =1", but why the relative elasticity of capital rental rate("exp(r_k)") with resptct to capital utilization("exp(u)") at the steady state is 0.1? It seems this parameter is given in advance but I cannot figure it out from the model by myself.

Your kindly help is much appreciated.

It follows directly from the calibration in Table 1. The parameter you mean is equal to the ratio of xi_2/xi_1, which is 0.1.

Thanks for replying, and I found the formal explanation in their previous working paper as well, saying that they set this ratio 0.1 as to limit the non-linearity of the model.